4/17/2009 @ 6:20AM

A Walk Through China's Tech Export Landscape

HONG KONG — Thousands of companies writing software code or shipping electronics parts to customers around the world gathered here this week, trying to attract buyers at trade fairs.

For many electronics manufacturers, the mood was glum. But information technology providers were more upbeat, finding customers looking to China to help cut costs during the global economic downturn.

As in other trade fairs all over the world, there were fewer buyers to go around this time, and many companies from mainland China needed financial assistance to attend the four-day fairs, which ended Thursday at the Hong Kong Convention and Exhibition Center. Delegations from regional governments in mainland China were out in force, working harder than ever to convince potential buyers that their second- or third-tier Chinese city was a worthy –and cheaper — outsourcing destination.

“Many of the international electronics shows that have been held earlier all experienced a decline in the number of buyers. Hong Kong won’t be an exception,” said Raymond Yip, assistant executive director of the Hong Kong Trade Development Council, which organized the electronics industry and information technology trade fairs. But “with the continuously growing China market, our declines will be moderate.”

China grew at its slowest pace in the first quarter on record, but analysts think that the worst may be past (See “China On A Rebound?“). Yip said that Western inventories have been nearly depleted, and suppliers will need to restock, furthering along a stabilization of orders for manufacturers and exporters. There were 8,500 organized buying groups that attended the Electronics Fair, and 3,200 were from mainland China, he said.

At the electronics fair, some salespeople’s ennui contrasted with the glossy LCDs, home and car alarms, and home and car entertainment systems on display in their booths. With the slump in the auto, housing and electronics markets, buyers signing contracts or even haggling with sales staffs were not a common sight. “The crisis has shaken our very roots,” said an executive of a mainland chip start-up.

Electronics exports from Chinese factories have plummeted because of dried-up Western demand for all kinds of consumer goods, including electronics. So Chinese suppliers focused on potential customers from the Middle East and South America, particularly Brazil, since demand from those regions has remained somewhat more stable, said the manager of a Shenzhen maker of digital satellite and cable receivers, small liquid crystal displays and digital phones.

But the mood was lighter at the Information and Communications Technology fair. Business has been stable and contracts have been renewed or signed with big corporations, said the manager of a company that sells software to Sony and Hitachi, among others, to help them cut costs in managing their supply chains. “ICT is otherwise doing fine, because in this difficult time, people are looking for more solutions to help them weather the current crisis,” Yip said.

Regional government delegations from mainland China remained a strong contingent at the ICT fair, as local trade officials promoted newly built ‘software parks’ and ‘technology zones’ in cities like Fuzhou, Qingdao, Chengdu and Dalian. The cities are eager to paint themselves as cheap outsourcing destinations, and many are a rich source of university graduates. Dalian and Qingdao have strived to supply software and IT development to neighbors Korea and Japan; Fuzhou wants to strengthen links with Taiwanese companies; and Chengdu presents itself as a gateway for foreign companies entering western China, Yip said.

A Chengdu company called Sheer Digital Art, which designs computer games, found itself solicited for collaboration by engineers from Beijing who were excited about the success of one of their recent creations, a multiplayer online role-playing game. For gaming companies, China’s economic slowdown and rising tide of unemployment has a silver lining, as the unemployed in China seek solace in virtual reality that costs little by the hour. That is helping some Chinese Internet companies offset the advertising slump.